Macau Funding Infrastructure Renewal With Casino Winnings

New University Campus Is First Visible Success in Trickling Down Gambling Receipts to Residents

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Wealth created from casinos helped build a new university campus in Macau.
Palani Mohan for The Wall Street Journal

By

Kate O'Keeffe

Updated Sept. 25, 2013 7:21 p.m. ET

HENGQIN ISLAND, China—The arrival of students on the University of Macau's new $1.3 billion campus this year will mark the Chinese gambling capital's first visible success in using casino wealth to benefit the city's 600,000 people.

Since China opened the former Portuguese colony to foreign casino operators in 2002, Macau has been transformed from a charming, somewhat rundown backwater with a smattering of gambling houses into a glittering, player's Mecca with 35 casinos crammed into 11.5 square miles.

Photos

Palani Mohan for The Wall Street Journal

As a result, Macau's economy has grown an average of 14% a year in the past decade, making it the fastest-growing economy in the world, just ahead of oil-rich Azerbaijan and recently democratized Myanmar, according to World Bank data.

Annual gambling revenue last year hit $38 billion, six times that of the storied Las Vegas Strip and up from under $3 billion a decade ago.

But growth in the gambling sector has been so rapid that the rest of the territory's economy and infrastructure have yet to catch up. The university campus is the first of several major government projects to get off the ground. Completion of the territory's first mass-transit system, renovations to its overburdened ferry terminals, various public-housing projects and the opening of a hospital, among other initiatives, have been delayed and are years away.

The poor state of public services in Macau is the product of decades of underinvestment by colonial rulers and, more recently, cost overruns and construction delays, say academics, politicians, business people and others.

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"We have the money, but we don't have the welfare," said Larry So, associate professor in the Macao Polytechnic Institute's social-work program. "If you get sick in Macau, everybody knows it's better to go to Hong Kong."

The Macau government "is committed to the advancement of policies that will improve the quality of life of its residents in all aspects," said a statement from the office of Chief Executive
Fernando Chui.
"Thus, we have ongoing major infrastructure works that require not only funding, but also time to be properly planned and completed."

In many ways, this is a school casinos have built. Macau, which earns 83% of its tax revenue from casinos and has the second-highest budget surplus in the world after Kuwait, is fully funding the project.

On top of that, the university in 2011 won a $135 million commitment from Wynn Resorts Ltd.'s Macau unit to support academic activities at its Asia-Pacific Academy of Economics and Management. But the donation came under scrutiny after one of Wynn's former board members suggested it could be an attempt to improperly influence public officials in Macau, prompting investigations by the U.S. Securities and Exchange Commission and the Justice Department.

Wynn Resorts said in July that it received a letter from the SEC saying it had ended its informal investigation. The SEC didn't comment publicly at the time. Wynn has said it did nothing wrong and that it hasn't heard from the U.S. Department of Justice about the matter. The Justice Department didn't respond to a request for comment.

Macau used its gambling windfall to increase spending on education, health care, housing and social welfare by 74% in 2012 from the year before. Some of that was driven by calls from China to diversify the territory's economy.

China's leaders have taken a personal interest in the university project, with then-President Hu Jintao officiating the campus's groundbreaking ceremony in 2009.

Macau was returned to China 14 years ago. Like Hong Kong, which was transferred to Beijing two years earlier, it will retain its own government and legal system for 50 years.

"This campus shows that the one-country, two-systems policy actually has a lot of potential," said
Zhao Wei,
the university's top academic official, who described Macau's relationship with the mainland as brotherly. The project "is good for the family," he said.

The new campus brings the family closer in some ways because it is technically located in China rather than in space-constrained Macau, where swamps have been drained to make room for mega-casinos.

To get to the school's new home on Hengqin Island, across a narrow waterway from Macau, students walk or drive through a short underwater tunnel. The campus, which comprises 80 buildings with both Chinese and Portuguese characteristics, is flush with greenery and barricaded from the rest of China by fences and a moat. The land will be under Macau rule, meaning the Internet won't be censored and Macau police will handle any crimes.

The new campus is 20 times as large as the old one and will have 10,000 students, up from 8,000 students at the old campus, which is still in use while the new complex opens in phases.

Currently, up to 40% of Macau high-school graduates go abroad for college, Mr. Zhao said. "They are not staying here because in Macau we don't have a good university," he said. But with the opening of the new campus, the university now plans to boost the quality of its research and recruit more top professors and students.

One area of focus for the university has been the training of students in casino and hotel management.
Alidad Tash,
who runs strategic marketing analytics and gaming operations at casino operator
Melco Crown Entertainment
Ltd.
, says he has hired 42 gaming-management majors from the university since 2006.

Mr. Tash sees graduates as potential senior executives, ultimately replacing the expatriates who typically run casinos. While working for another casino operator, Mr. Tash in 2006 came across an intern from the university processing laundry receipts. He said he had the student, whom he thought was underutilized, reassigned to his team there. Now that former intern is a senior manager at Melco Crown.

For students aspiring to work outside the casino industry, however, the situation is more difficult.
Agnes Lam,
assistant professor at the university's communications department, said it is difficult to place the 120 or so students who graduate from her department every year. "If the government can't really develop other industries, that will hurt our department," she said.

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